An inventory acquisition is received late in the afternoon of December 31 after the physical inventory is completed.If the acquisition is included in accounts payable and purchases, but excluded from inventory, the result:
A) does not affect earnings.
B) is indeterminable from the information given.
C) is an understatement of net earnings.
D) is an overstatement of net earnings.

Question

Quizplus · Accepted Answer

Since the inventory acquisition was received late in the afternoon of December 31 after the physical inventory was completed, it should have been included in the inventory. By excluding it from inventory, the company is understating the value of their inventory, and therefore, understating their cost of goods sold (COGS). This results in an overstatement of net earnings.

An Inventory Acquisition Is Received Late in the Afternoon of December